tailieunhanh - Lecture Managerial accounting - Chapter 10: Decentralization and performance evaluation

After studying this chapter you will be able to understand: Centralized versus decentralized organizations, segment evaluation, return on investment, residual income and eva®, transfer pricing. | DECENTRALIZATION AND PERFORMANCE EVALUATION © itaesem/iStockphoto CHAPTER 10 THE SUM OF THE PARTS Three years of losses for Centex Yarns’ Nylon Fibers Division How long will management let this go on? What information would help Monica make her case? CENTRALIZED VERSUS DECENTRALIZED ORGANIZATIONS Unit Unit Unit © Tomwang112 / iStockphoto Unit 10 1 . DECENTRALIZATION Pushes decision making and responsibility down the organization chart to lower level managers Requires a way to evaluate the decentralized managers and the segments of the business they manage Runs along a continuum THE DECENTRALIZATION CONTINUUM CENTRALIZED DECENTRALIZED Decision making authority is at the top Decision making authority is delegated to lower level managers Where do you want to be? EFFECTS OF DECENTRALIZATION ADVANTAGES Better information for operational decisions More timely information for operational decisions Develops decision making skills for future Gives top managers time to . | DECENTRALIZATION AND PERFORMANCE EVALUATION © itaesem/iStockphoto CHAPTER 10 THE SUM OF THE PARTS Three years of losses for Centex Yarns’ Nylon Fibers Division How long will management let this go on? What information would help Monica make her case? CENTRALIZED VERSUS DECENTRALIZED ORGANIZATIONS Unit Unit Unit © Tomwang112 / iStockphoto Unit 10 1 . DECENTRALIZATION Pushes decision making and responsibility down the organization chart to lower level managers Requires a way to evaluate the decentralized managers and the segments of the business they manage Runs along a continuum THE DECENTRALIZATION CONTINUUM CENTRALIZED DECENTRALIZED Decision making authority is at the top Decision making authority is delegated to lower level managers Where do you want to be? EFFECTS OF DECENTRALIZATION ADVANTAGES Better information for operational decisions More timely information for operational decisions Develops decision making skills for future Gives top managers time to focus on strategic planning DISADVANTAGES Conflict between operational decisions and corporate strategy Duplicated work effort across units Reduced communication between units Increased potential for errors as managers learn to make decisions RESPONSIBILITY ACCOUNTING An organization is divided into operating units, where managers have decision making authority Unit managers are evaluated only on those items under their control Costs Profits Investments (assets) COST CENTER Manager has control over only the costs incurred by the center No control over revenue or investment in assets Goal is to minimize costs while providing an acceptable service level or product quality Compare actual results to flexible budget PROFIT CENTER Manager has control over both revenues and costs for the center No control over investment in assets Goal is to maximize unit’s profit Actual profit compared to flexible budget INVESTMENT CENTER Manager is responsible for revenues, costs and investment in assets Goal .